Order against Phenix Properties Limited

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WTM/PS/11/ERO-GLO/APR/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER

ORDER

Under Sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 In the matter of Phenix Properties Limited In respect of:

1. Phenix Properties Limited [PAN: AAECP2476Q] 2. Mr. Ashim Das [PAN:AMRPD2405P], 3. Mr. Nirmalya Mukherjee [PAN: ALMPM5615N], 4. Mr. Abu Naseer Jamir Ahmed [DIN: 1996430], 5. Mr. Prithiish Das [PAN: AINPD9015B], 6. Mr. Somnath Gupta [PAN: AGGPG9365G], 7. Mr. Samir Saha [PAN: BJMPS7143A], 8. Mr. Saurabh Chakraborty [PAN: AHLPC8055B], 9. Mr. Moloy Dey [DIN: 2235938], 10. Mr. Kamdev Bhattacharjee [PAN: AISPB3975F], 11. Mr. Shekhar Saha [PAN: AKAPS2175E], 12. Mr. Badrul Islam [PAN: AATPI5977M], 13. Mr. Debjyoti Das [PAN:AKCPD2678K], 14. Mr. Amar Kumar Das [PAN: AJTPD9357P], 15. Mr. Utpal Bandopadhyay [DIN: 1899027], 16. Mr. Trailukya Bora [DIN: 1899058], 17. Mr. Gopal Deka [PAN: AFUPD9977N], 18. Mr. Pulak Hazarika [DIN: 1899072] and 19. Ms. Jyoti Prasad Saikia [DIN: 1899043].

________________________________________________________________________ Date of Hearing: November 23, 2015 Appearances: Mr. Ashim Das, Mr. Nirmalya Mukherjee, Mr. Prithiish Das, Mr.

Somnath Gupta, Mr. Samir Saha, Mr. Saurabh Chakraborty,Mr. Kamdev Bhattacharjee andMr. Shekhar Saha appeared in-person;

Mr. Shekhar Saha also filed letter of authority from Mr. Trailukya Bora,Mr. Utpal Bandopadhyay, Mr. Gopal Deka, Mr. Pulak Hazarika and Ms. Jyoti Prasad Saikia;

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Mr. Badrul Islam,Mr. Abu Naseer Jamir Ahmed,Mr. Amar Kumar Das,Mr. Moloy Dey and Mr. Debjyoti Das appeared through their authorized representative Mr. K.H. Khandaker, Advocate. For SEBI: Mr. Prashanta Mahapatra, General Manager,Mr. T. Vinay Rajneesh, Assistant General Manager and Mr. Laltu Pore, Assistant General Manager.

________________________________________________________________________

1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), vide an

ex-parteinterim Order dated April 24, 2015 (hereinafter referred to as ‘the interim

order’) had observed that the company, Phenix Properties Limited(hereinafter

referred to as ‘Phenix’ or ‘the Company’) is prima facie engaged in fund mobilising

activity from the public, through theOffer ofRedeemable Preference Shares

(hereinafter referred to as ‘RPS’) and had allegedly violated the provisions of

Sections 56, 60 (read with Section 2(36)), 67, 73 of the Companies Act, 1956 and the

provisions of the SEBI (Disclosure and Investor Protection) Guidelines 2003

(hereinafter referred to as ‘DIP Guidelines’) read with the SEBI (Issue of Capital &

Disclosure Requirements) Regulations, 2009 (hereinafter referred to as ‘ICDR

Regulations’). In order to protect the interest of investors and to ensure that only

legitimate fund raising activities are carried on by the Company and its directors,

SEBI had issued the following directions:

“… … 7. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11, 11(4), 11A and 11B of the SEBI Act, hereby issue the following directions – i. PPL (PAN: AAECP2476Q) shall forthwith cease to mobilize funds from

investors through the Offer of Redeemable Preference Shares or through the issuance of equity shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions;

ii. PPLand its present Directors, viz. Shri Ashim Das (DIN: 1132191), Shri Nirmalya Mukherjee (PAN: ALMPM5615N; DIN: 1201138), Shri Abu Naseer Jamir Ahmed (DIN: 1996430), Shri Prithiish Das (PAN: AINPD9015B; DIN: 2037852), Shri Somnath Gupta (PAN: AGGPG9365G; DIN: 2040170), Shri Samir Saha (PAN: BJMPS7143A; DIN: 2069349), Shri Saurabh Chakraborty (PAN: AHLPC8055B; DIN: 2184673), Shri Moloy Dey (DIN: 2235938), Shri Kamdev Bhattacharjee (PAN: AISPB3975F; DIN: 2235979), Shri Shekhar Saha (PAN: AKAPS2175E; DIN: 2250125) and Shri Badrul Islam (PAN:

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AATPI5977M; DIN: 2264925), are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, till further orders;

iii. The past Directors of PPL, viz. Shri Debjyoti Das (DIN: 1132239), Shri Amar Kumar Das (PAN: AJTPD9357P; DIN: 1132219), Shri Utpal Bandopadhyay (DIN: 1899027), Shri Trailukya Bora (DIN: 1899058), Shri Gopal Deka (PAN: AFUPD9977N; DIN: 1899011), Shri Pulak Hazarika (DIN: 1899072) and Smt. Jyoti Prasad Saikia (DIN: 1899043), are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, till further orders;

iv. PPL and its abovementioned past and present Directors, are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions;

v. PPL shall provide a full inventory of all its assets and properties; vi. PPL's abovementioned past and present Directors shall provide a full inventory of

all their assets and properties; vii. PPL and its abovementioned present Directors shall not dispose of any of the

properties or alienate or encumber any of the assets owned/acquired by that company through the Offer of Redeemable Preference Shares, without prior permission from SEBI;

viii. PPL and its abovementioned present Directors shall not divert any funds raised from public at large through the Offer of Redeemable Preference Shares, which are kept in bank account(s) and/or in the custody of PPL;

ix. PPL and its abovementioned present Directors shall furnish complete and relevant information (as sought by SEBI letters dated October 1, 2014 and October 21, 2014), within 14 days from the date of receipt of this Order.

8. The above directions shall take effect immediately and shall be in force until further orders. … 9. This Order is without prejudice to the right of SEBI to take any other action that may be initiated against PPL and its abovementioned Directors, in accordance with law.”

2. The interim order observed that the prima facie observations made therein were on the

basis of correspondences exchanged between SEBI and the Company alongwith the

documents contained therein and the information/ documents obtained from the

‘MCA-21’ portal. The interim order was also treated as a show cause notice which

advised the Company and its directors to file their replies within 21 days from the

date of its receipt and also seek an opportunity of personal hearing.

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3. The interim order was forwarded to the Company and its directors namelyMr. Ashim

Das, Mr. Nirmalya Mukherjee, Mr. Abu Naseer Jamir Ahmed, Mr. Prithiish Das, Mr.

Somnath Gupta, Mr. Samir Saha, Mr. Saurabh Chakraborty, Mr. Moloy Dey, Mr.

Kamdev Bhattacharjee, Mr. Shekhar Saha, Mr. Badrul Islam, Mr. Debjyoti Das, Mr.

Amar Kumar Das, Mr. Utpal Bandopadhyay, Mr. Trailukya Bora, Mr. Gopal Deka,

Mr. Pulak Hazarika and Ms. Jyoti Prasad Saikiavide letters dated April 24, 2015. The

letters could be delivered only to Mr. Badrul Islam, Mr. Nirmalya Mukherjee, Mr.

Prithiish Das, Mr. Shekhar Saha and Mr. Amar Kumar Das. The letters sent to the

remaining directorshad returned undelivered.Before proceeding further, SEBI

intimated the passing of the interim order vide the public notice in the newspapers

namely ‘Assam Tribune’ and ‘Asomiya Pratidin’ on September 07, 2015.

4. Mr. Shekhar Saha vide his letter dated May 15, 2015, replied to the interim order on

behalf of the Company. While seeking permission to sell the land, the submissions in

brief, are as under:

- The provisions of the Sections 67(1) and 67(3) of the Companies Act, 1956 have not

been violated as RPS were not offered to more than 50 persons in a single day,

though the allotment details as filed shows that the number of persons has exceeded

50 persons. Moreover, the RPSs were issued on private placement basis after

complying with the provisions of Section 81(1A) of the Companies Act, 1956.

- SEBI should differentiate between offer and allotment before reaching to a

conclusion.

- The reference to the case of Sahara India Real Estate Corporation Limited and

Others should not be linked with the Company as they have taken investment of

only a few crores and a maximum part of the funds have been refunded.

- They had already initiated the sale of land and property which was at final stages.

However, after receiving the interim order, they are not able to sell/ dispose off any

assets.

- The landed property assets are the main potential assets which are expected to fetch

large amount and the same can be utilized to repay the remaining investors.

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5. Thereafter,SEBI proceeded further and granted an opportunity of personal hearing

to the Company and its directors on September 15, 2015. The scheduled date was

communicated vide SEBI’s letter dated August 17, 2015. The date of hearing was

rescheduled to September 24, 2015 due to certain administrative exigencies.The same

was communicated vide the SEBI letter dated August 25, 2015. The date of hearing

was also communicated vide the public notice in the newspapers namely ‘Assam

Tribune’ (September 07, 2015) and ‘Asomiya Pratidin’ (September 07, 2015). The

Company and its directors were advised that in case they fail to appear for the

personal hearing before SEBI on the aforesaid date, then the matter would be

proceeded ex-parte on the basis of material available on record.

6. In response to the newspaper advertisement following persons vide respective letter

replied as under:

i. Mr. Gopal Deka, Mr. Utpal Bandopadhyay, Mr. Trailukya Bora, Mr. Pulak Hazarika

and Ms. Jyoti Prasad Saikiavide separate letters all dated September 12, 2015

submitted that they all had resigned from the post of directorship on February 15,

2007. It was submitted that till they were the directors of the Company, no money

was raised by the Company.It was also stated that they all are persons of limited

means and it would not be possible for them to come to Mumbai for the personal

hearing.

ii. Mr. Badrul Islam vide his letter received by SEBI on September 22, 2015, submitted

that Mr. Shekhar Saha, director of the Company had asked him not to reply

personally as he will send the reply on behalf of the Company. He expressed his

inability to appear on the date fixed for the personal hearing for the reason that his

wife had delivered a baby with critical condition and he is the only person to take

care of both of them. He also stated that due to the festival of ‘Bakri Idd’ he cannot

come for the personal hearing.

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iii. Mr. Dibjyoti Das vide his letter received by SEBI on September 29, 2015, submitted

that he was the director of the Company during the period from 2007 to 2010 and

had resigned from the directorship on February 19, 2010. The necessary ‘Form no.

32’ and ‘Form no. 2’ were filed by him before the Registrar of Companies. He stated

that he does not have any personal knowledge about the Company in respect of their

business at present. Vide the said letter he had also requested for exemption from

personal hearing.

iv. Later, the persons namely Mr. Ashim Das, Mr. Nirmalya Mukherjee, Mr. Abu Naseer

Jamir Ahmed, Mr. Somnath Gupta, Mr. Samir Saha, Mr. Saurabh Chakraborty, Mr.

Moloy Dey, Mr. Kamdev Bhattacharjee, Mr. Amar Kumar Das, Mr. Utpal

Bandopadhyay, Mr. Trailukya Bora, Mr. Gopal Deka, Mr. Pulak Hazarika and Ms.

Jyoti Prasad Saikia vide a common letter received by SEBI on September 22, 2015,

submitted that they had resigned from the Company. It was stated that the Company

had stopped its work since the year 2011, later in the year 2012, it was amalgamated

with ‘Phenix Sarathi’. Further, it was stated that the Company had passed through

difficult situation from the year 2010 to 2012 and theyhad only mobilized the

amounts against the ‘project’ and ‘tour package’. It was also stated that number of

litigations have been filed by different persons against the Company before various

Police Stations. One matter is also pending before the Hon’ble High Court of

Gauhati. These persons requested for the materials relied upon while passing of the

interim order.

7. The above requests were considered and another opportunity of personal hearing

was afforded to these on November 23, 2015. On the date fixed, Mr. Ashim Das,

Mr. Nirmalya Mukherjee, Mr. Prithiish Das, Mr. Somnath Gupta, Mr. Samir Saha,

Mr. Saurabh Chakraborty, Mr. Kamdev Bhattacharjee and Mr. Shekhar Saha

appeared in-person. Mr. Shekhar Saha during the course of personal hearing also

submitted a letter of authority from the persons namely Mr. Trailukya Bora, Mr.

Utpal Bandopadhyay, Mr. Gopal Deka, Mr. Pulak Hazarika and Ms. Jyoti Prasad

Saikia.

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Mr. Shekhar Saha during the course of personal hearing submitted a copy of the

reply dated May 15, 2015, of the Company to the interim order. He also submitted

that no balance sheet for the Company was prepared after 2011 and sought

permission to dispose of the assets of the Company for making payments to the

investors. Mr. Ashim Das, Mr. Nirmalya Mukherjee, Mr. Prithiish Das, Mr. Somnath

Gupta, Mr. Samir Saha, Mr. Saurabh Chakraborty and Mr. Kamdev

Bhattacharjeealso relied on the submissions made on behalf of the Company dated

May 15, 2015. Mr. Shekhar Saha further filed the ‘form 32’ with respect to the

cessation of directorship of the persons namely Mr. Trailukya Bora, Mr. Utpal

Bandopadhyay, Mr. Gopal Deka, Mr. Pulak Hazarika and Ms. Jyoti Prasad Saikia.

The other persons namely Mr. Badrul Islam, Mr. Abu Naseer Jamir Ahmed, Mr.

Amar Kumar Das, Mr. Moloy Dey and , Mr. Debjyoti Das appeared through their

authorized representative Mr. K.H. Khandaker, Advocate, who also preferred to rely

on the submissions of the Company dated May 15, 2015

8. On conclusion of the personal hearing, all the persons were directed to submit the

latest balance sheet of the Company and also the list of the investors to whom

monies are claimed to have been repaid along with the proof for such payments. For

submitting such details, they were granted time of one month. Later, Mr. Sekhar

Saha vide his e-mail dated December 29, 2015, requested for extension of time till

January 15, 2016, for submitting such details. The request was considered and the

time was extended till January 15, 2016. Mr. Sekhar Saha vide another e-mail dated

February 09, 2016,requested for further extension till February 2016, for submitting

the details. However, till date neither the latest balance sheet of the Company nor the

list of the investors to whom monies are claimed has been submitted by the

Company and its directors.

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Considering that reasonable opportunities to the Company and its directors had

already been afforded for making submissions in the matter, I am inclined to proceed

further with the matter, on the basis of merits of the case.

9. I have considered the interim order and the material available on record. The

following are the observations from the interim order:

“… i. PPL was incorporated on June 10, 2005, with the ROC, Shillong with CIN No. as

U70101AS2005PLC007784. Its Registered Office is at G.S. Road, Lachit Nagar, Ulubari, Guwahati–781007, Assam, India.

ii. The present Directors in PPL are Shri Ashim Das, Shri Nirmalya Mukherjee, Shri Abu Naseer Jamir Ahmed, Shri Prithiish Das, Shri Somnath Gupta, Shri Samir Saha, Shri Saurabh Chakraborty, Shri Moloy Dey, Shri Kamdev Bhattacharjee, Shri Shekhar Saha and Shri Badrul Islam.

iii. Shri Debjyoti Das, Shri Amar Kumar Das, Shri Utpal Bandopadhyay, Shri Trailukya Bora, Shri Gopal Deka, Shri Pulak Hazarika and Smt. Jyoti Prasad Saikia, who were earlier Directors of PPL, have since resigned.

iv. Form 2 (Form for Return of Allotment – filed by PPL with the ROC in accordance with the provisions of the Companies Act, 1956) reveals that the company issued "Redeemable Preference Shares" ("Offer of Redeemable Preference Shares") to investors, details of which are provided below –

Type of Security

Year No. of persons to whom preference shares were allotted

Total Amount (� in Lakhs)

Redeemable Preference

Shares

2006–07 215 0.022007–08 6350 0.632008–09 16139 1.622009–10 38285 3.83

Total 61089 6.10

** From a sample analysis of the list of investors under the Offer of Redeemable Preference Shares, it is observed that the names of several investors have been repeated in the lists of allotments for a particular Financial Year either with the same addresses or different addresses.

v. In addition to the above, it is observed from PPL's Balance Sheet for the Financial

Year 2009–10, that share application money has been reflected therein as �12.42 Lakhs, which subsequently increased to �13.72 Lakhs in the Financial Year 2010–11.

vi. PPL has not filed Annual Accounts and Annual Returns with the ROC for the Financial Years 2011–12, 2012–13 and 2013–14.”

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10. Having considered the above, it is now necessary to determine whether the

Company had made a public issue as alleged in the interim order and if so, whether

the Company had complied with the public issue norms. The liability of the directors

of the Company also needs to be determined as they have also been alleged in the

interim order.

11. In order to ascertain whether an issue of securities is a ‘public issue’ or done on

‘private placement’, it is necessary to make a reference to Section 67(3) of the

Companies Act, 1956, which reads as under:

“67. (1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (2) ... (3) No offer or invitation shall be treated as made to the public by virtue of sub- section (1) or sub- section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances- (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation … Provided that nothing contained in this sub-section shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more: Provided further that nothing contained in the first proviso shall apply to non-banking financial companies or public financial institutions specified in section 4A of the Companies Act, 1956 (1 of 1956).”

In terms of Section 67(3), as amended by the Companies (Amendment) Act, 2000, with

effect from December 13, 2000, no offer or invitation shall be treated as made to the

public by virtue of sub-sections (1) or (2), as the case may be, if the offer or

invitation can properly be regarded, in all circumstances - (a) as not being calculated

to result, directly or indirectly, in the shares or debentures becoming available for

subscription or purchase by persons other than those receiving the offer or

invitation; or (b) otherwise as being a domestic concern of the persons making and

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receiving the offer or invitation. In terms of the first proviso to the aforesaid section,

the provisions of Section 67(3) shall not apply in a case where the offer or

invitation to subscribe for shares or debentures is made to fifty persons or

more. Therefore, the number of subscribers becomes relevant to conclude whether

an issue of shares are for public or on a private placement basis. In view of the same,

if an offer of securities are made to fifty or more persons, it would be deemed to be a

public issue.

12. I now place my reliance on the order of Hon’ble Supreme Court of India in the

matter of Sahara India Real Estate Corporation Limited & Others Vs. SEBIand

another(Civil Appeal Nos. 9813 and 9833 of 2011; decided on August 31, 2012) (‘the

Sahara case’) had inter alia held that -

“Section 67(1) deals with the offer of shares and debentures to the public and Section 67(2) deals with invitation to the public to subscribe for shares and debentures and how those expressions are to be understood, when reference is made to the Act or in the articles of a company. The emphasis in Section 67(1) and (2) is on the “section of the public”. Section 67(3) states that no offer or invitation shall be treated as made to the public, by virtue of subsections (1) and (2), that is to any section of the public, if the offer or invitation is not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation or otherwise as being a domestic concern of the persons making and receiving the offer or invitations. Section 67(3) is, therefore, an exception to Sections 67(1) and (2). If the circumstances mentioned in clauses (1) and (b) of Section 67(3) are satisfied, then the offer/invitation would not be treated as being made to the public. The first proviso to Section 67(3) was inserted by the Companies (Amendment) Act, 2000 w.e.f. 13.12.2000, which clearly indicates, nothing contained in Sub-section (3) of Section 67 shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. … Resultantly, if an offer of securities is made to fifty or more persons, it would be deemed to be a public issue, even if it is of domestic concern or proved that the shares or debentures are not available for subscription or purchase by persons other than those received the offer or invitation. … I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. …”

13. In the present case, I note that the Company had offered and allotted RPS to a total

of 61,089allottees (i.e. 215 allottees in 2006-07; 6,350 allottees in 2007-08; 16,139

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allottees in 2008-09 and 38,285 allottees in 2009-10) and had raised �6.10 lakh. I

note that the Company has not submitted the details to show that all the allotments

were out of different offers. Further, from the proximity in the dates of allotment of

RPSs it can be presumed that all these tranches of allotment of RPSs were out of a

single offer to more than 49 persons. Further, the Company has failed to adduce any

evidence to show that the issue was a domestic concern of the members of the

Company. Thus on the face of it, the issue made by the Company cannot be

considered as a private placement. Considering the same, it is held that the Company

had made an offer and allotted RPSs to more than 49 persons, thereby making a

public issue of RPSs (in terms of the first proviso to Section 67(3) of the Companies

Act, 1956) during the period alleged in the interim order.

14. By making a public issue of RPS, as discussed above, the Company was mandated to

comply with all the legal provisions that govern and regulate public issue of such

securities, including the Companies Act, 1956 and the SEBI Act and regulations. In

this context, I refer and rely on the below mentioned observation made by the

Hon'ble Supreme Court of India in the matter of Sahara case:

“... ... that any share or debenture issue beyond forty nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. …”

15. In view of the above observations, by virtue of Section 55A(a) and (b), SEBI has

jurisdiction and would govern the issue of RPS as the same was clearly made to more

than 49 persons. As alleged in theinterimorder, the Company was mandated to

comply with the provisions of Sections 56, 60, 67 and 73 of the Companies Act,

1956, in respect of its offer and issue of RPS. In terms of Section 56(1) of the

Companies Act, 1956, every prospectus issued by or on behalf of a company, shall

state the matters specified in Part I and set out the reports specified in Part II of

Schedule II of that Act. Further, as per Section 56(3) of the Companies Act, 1956,

no one shall issue any form of application for shares in a company, unless the form

is accompanied by abridged prospectus, contain disclosures as specified. Section

2(36) of the Companies Act read with Section 60 thereof, mandates a company to

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register its ‘prospectus’ with the RoC, before making a public offer/ issuing the

‘prospectus’.

16. The interim order further alleged that the Company had failed to comply with Section

73 of the Companies Act, 1956, in respect of its issuance of RPS. By issuing RPSs to

more than 49 persons, the Company had to compulsorily list such securities in

compliance with Section 73(1) of the Companies Act, 1956. As per Section 73(1) of

the Companies Act, 1956, a company is required to make an application to one or

more recognized stock exchanges for permission for the shares or debentures to be

offered to be dealt with in the stock exchange. There is no material on record to say

that the Company has filed an application with a recognised stock exchange to

enable the RPS to be dealt within such exchange. Therefore, the Company has failed

to comply with this requirement.

17. Section 73(2) of the Companies Act, 1956 states that "Where the permission has not been

applied under subsection (1) or such permission having been applied for, has not been granted as

aforesaid, the company shall forthwith repay without interest all moneys received from applicants in

pursuance of the prospectus, and, if any such money is not repaid within eight days after the company

becomes liable to repay it, the company and every director of the company who is an officer in default

shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money

with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be

prescribed, having regard to the length of the period of delay in making the repayment of such

money". As the Company failed to make an application for listing such RPSs, the

Company had to forthwith repay such money collected from investors. If such

repayments are not made within 8 days after the Company becomes liable to repay,

the Company and every director of the Company, would be jointly and severally

liable to repay with interest at such rate. There is no material on record to say that

the Company has complied with the provisions of Section 73(3).

18. The Company was also mandated to comply with the provisions of DIP Guidelines,

while issuing RPS. The interim order has stated that the Company failed to comply

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with the following provisions of the DIP Guidelines as regards its Offer of RPSs

during the financial years 2006-07, 2007-08and 2008-09:

“… a) Clause 2.1.1. – (Filing of offer document) b) Clause 2.1.4 – (Application for listing) c) Clause 2.1.5 – (Issue of securities in dematerialized form), d) Clause 2.8 – (Means of finance), e) Clause 4.1 – (Promoters contribution in a public issue by unlisted companies), f) Clause 4.11 – (Lock-in of minimum specified promoters contribution in public issues), g) Clause 4.14 – (Lock-In of pre-issue share capital of an unlisted company) h) Clause 5.3.1 – (Memorandum of understanding), i) Clause 5.3.3 – (Due Diligence Certificate) j) Clause 5.3.5 – (Undertaking), k) Clause 5.3.6 – (List Of Promoters Group And Other Details), l) Clause 5.4 – (Appointment of intermediaries) m) Clause 5.6 – (Offer document to be made public) n) Clause 5.6A – (Pre-issue Advertisement) o) Clause 5.7 – (Despatch of issue material) p) Clause 5.8 – (No complaints certificate) q) Clause 5.9 – (Mandatory collection centers including Clause 5.9.1 (Minimum number of

collection centres) r) Clause 5.10 – (Authorised Collection Agents) s) Clause 5.12.1 – (Appointment of compliance officer) t) Clause 5.13 – (Abridged prospectus) u) Clause 6.0 – (Contents of offer documents) v) Clause 8.3 – (Rule 19(2)(b) of SC(R) Rules, 1957) w) Clause 8.8.1 – (Opening & closing date of subscription of securities) x) Clause 9 – (Guidelines on advertisements by Issuer Company) y) Clause 10.1 – (Requirement of credit rating) z) Clause 10.5 – (Redemption) 4.8 As per Regulation 111(1) of the ICDR Regulations, the DIP Guidelines, “shall stand rescinded”. However, Regulation 111(2) of the ICDR Regulations, provides that: “(2) Notwithstanding the repeal under sub-section (1) of the repealed enactments,— (a) anything done or any action taken or purported to have been done or taken including observation made in respect of any draft offer document, any enquiry or investigation commenced or show cause notice issued in respect of the said Guidelines shall be deemed to have been done or taken under the corresponding provisions of these regulations; (b) any offer document, whether draft or otherwise, filed or application made to the Board under the said Guidelines and pending before it shall be deemed to have been filed or made under the corresponding provisions of these regulations.” …”

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From the foregoing, I conclude that the Company failed to comply with the

stipulation under Sections 56, 60, 73 of the Companies Act, 1956 read with the

Companies Act, 2013 and the aforesaid provisions of the DIP Guidelines, in respect

of its offer and issuance of preference shares as discussed in this Order. The

Company shall therefore be liable to make refunds as per the mandate under Section

73(2) of the Companies Act, 1956 and also for regulatory action for committing the

above violations.In the light of above findings, the argument of the Company that its

case cannot be linked to Sahara case as it had taken only few crores from the

investors and already refunded majority of the amounts to its investors, finds no

merit.

19. Liability of Directors: The interimorder was issued against the directors of the

Company namely Mr. Ashim Das, Mr. Nirmalya Mukherjee, Mr. Abu Naseer Jamir

Ahmed, Mr. Prithiish Das, Mr. Somnath Gupta, Mr. Samir Saha, Mr. Saurabh

Chakraborty, Mr. Moloy Dey, Mr. Kamdev Bhattacharjee, Mr. Shekhar Saha, Mr.

Badrul Islam, Mr. Debjyoti Das, Mr. Amar Kumar Das, Mr. Utpal Bandopadhyay,

Mr. Trailukya Bora, Mr. Gopal Deka, Mr. Pulak Hazarika and Ms. Jyoti Prasad

Saikia.

a. The details of their appointment and resignations are as under:

Name Date of Appointment Date of Cessation

Mr. Ashim Das 01/01/2007 Continuing as director

Mr. Nirmalya Mukherjee 30/09/2009 Continuing as director

Mr. Abu Naseer Jamir Ahmed 15/02/2007 Continuing as director

Mr. Prithiish Das 15/02/2007 Continuing as director

Mr. Somnath Gupta 15/02/2007 Continuing as director

Mr. Samir Saha 11/01/2007 Continuing as director

Mr. Saurabh Chakraborty 30/09/2009 Continuing as director

Mr. Moloy Dey 30/09/2009 Continuing as

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director

Mr. Kamdev Bhattacharjee 30/09/2009 Continuing as director

Mr. Shekhar Saha 30/09/2009 Continuing as director

Mr. Badrul Islam 30/09/2009 Continuing as director

Mr. Debjyoti Das 15/02/2007 19/02/2010

Mr. Amar Kumar Das 10/06/2005 30/04/2008 Mr. Utpal Bandopadhyay 10/06/2005 15/02/2007 Mr. Trailukya Bora 10/06/2005 15/02/2007 Mr. Gopal Deka 10/06/2005 15/02/2007 Mr. Pulak Hazarika 10/06/2005 15/02/2007 Ms. Jyoti Prasad Saikia 10/06/2005 15/02/2007

b. As perSection 291 of the Companies Act, 1956, the board of directors of a company

shall be entitled to exercise all such powers and do all such acts and things as the

company is authorized to exercise and do. Therefore, the board of directors being

responsible for the conduct of the business of a company will be liable for any non-

compliance of law and such liability is also on the individual directors. In this regard,

refer to the order of Hon’ble High Court of Madras in the matter of Madhavan

Nambiar Vs. Registrar of Companies [2002 108 Comp Cas 1 Mad] wherein it was

observed that”

“13. … A director either full time or part time, either elected or appointed or nominated is bound to discharge the functions of a director and should have taken all the diligent steps and taken care in the affairs of the company. 14. In the matter of proceedings for negligence, default, breach of duty, misfeasance or breach of trust or violation of the statutory provisions of the Act and the rules, there is no difference or distinction between the whole-time or part time director or nominated or co-opted director and the liability for such acts or commission or omission is equal. So also the treatment for such violations as stipulated in the Companies Act, 1956.”.

I note that the position of a ‘director’ in a public company/listed company comes

along with responsibilities and compliances under law, which have to be fulfilled by

such director or face the consequences for any violation or default thereof.

c. I note that the Company had offered and issued RPS in the financial years2006-07,

2007-08, 2008-09 and 2009-10(the date of first allotment being March 30, 2007, as

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noted from the ‘Form 2’ available on record and the last date being March 31, 2010).

Section 56 of the Companies Act, 1956 imposes the liability for the compliance, on

the company, every director, and persons responsible for the issuance of the

prospectus. The liability of the Company to repay under Section 73(2) of the

Companies Act, 1956 read with Section 27 of the SEBI Act, is continuing and the

same continues till all the repayments are made to the investors/ public. Therefore,

the directors who were present during the period when the Company had made the

offer and allotted RPS shall be liable for violation of Sections 56, 60 and 73 of the

Companies Act, 1956 including the default in making refunds as mandated therein.

As the liability to make repayments under Section 73(2) of the Companies Act read

with Section 27 of the SEBI Act is a continuing liability, the persons who joined the

Company’s Board pursuant to the offer and allotment of RPS shall also be liable if

the Company and the concerned directors have failed to make refunds, as mandated

under the discussed provisions of law.

d. From the table above, it is noted that Mr. Ashim Das, Mr. Nirmalya Mukherjee, Mr.

Abu Naseer Jamir Ahmed, Mr. Prithiish Das, Mr. Somnath Gupta, Mr. Samir Saha,

Mr. Saurabh Chakraborty, Mr. Moloy Dey, Mr. Kamdev Bhattacharjee, Mr. Shekhar

Saha, Mr. Badrul Islam, Mr. Debjyoti Das and Mr. Amar Kumar Das, were the

directors of the Company during the time of impugned issue and allotments of RPSs

and were responsible for the affairs of the Company, at the relevant point of time.

Mr. Ashim Das, Mr. Nirmalya Mukherjee, Mr. Abu Naseer Jamir Ahmed, Mr.

Prithiish Das, Mr. Somnath Gupta, Mr. Samir Saha, Mr. Saurabh Chakraborty, Mr.

Moloy Dey, Mr. Kamdev Bhattacharjee, Mr. Shekhar Saha and Mr. Badrul Islam

continue to be the directors of the Company. Mr. Debjyoti Das and Mr. Amar

Kumar Das had resigned from the Company on February 19, 2010 and April 30,

2008, respectively (after the first allotment date i.e. March 30, 2007).

In view of the same, it can be concluded that Mr. Ashim Das, Mr. Nirmalya

Mukherjee, Mr. Abu Naseer Jamir Ahmed, Mr. Prithiish Das, Mr. Somnath Gupta,

Mr. Samir Saha, Mr. Saurabh Chakraborty, Mr. Moloy Dey, Mr. Kamdev

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Bhattacharjee, Mr. Shekhar Saha, Mr. Badrul Islam, Mr. Debjyoti Das and Mr. Amar

Kumar Das areresponsible for the violations committed by the Company and liable,

jointly and severally, for making refunds along with interest to the investors as

mandated under Section 73(2) of the Companies Act, 1956 read with Section 27 of

the SEBI Act.

e. Other persons namely Mr. Utpal Bandopadhyay, Mr. Trailukya Bora, Mr. Gopal

Deka, Mr. Pulak Hazarika and Ms. Jyoti Prasad Saikia had resigned on February 15,

2007. These persons vide respective letters have submitted that till they were the

directors of the Company, no money was raised. The details perused from ‘MCA-21’

portal also shows that Mr. Utpal Bandopadhyay, Mr. Trailukya Bora, Mr. Gopal

Deka, Mr. Pulak Hazarika and Ms. Jyoti Prasad Saikia had resigned from the

Company on February 15, 2007, i.e. prior to the first date of allotment of impugned

RPSs i.e. March 30, 2007.I note that the date of resolution for the offer of RPS is not

available on record. In the absence of any other material to show the involvement of

Mr. Utpal Bandopadhyay, Mr. Trailukya Bora, Mr. Gopal Deka, Mr. Pulak Hazarika

and Ms. Jyoti Prasad Saikiain the offer and allotment of RPSs, I am inclined to give

the benefit of doubt to them. In view of the same, the interim directions against these

are liable to be revoked and they be discharged from the present proceedings.

20. I note thatthe Company and its directors namely Mr. Ashim Das, Mr. Nirmalya

Mukherjee, Mr. Abu Naseer Jamir Ahmed, Mr. Prithiish Das, Mr. Somnath Gupta,

Mr. Samir Saha, Mr. Saurabh Chakraborty, Mr. Moloy Dey, Mr. Kamdev

Bhattacharjee, Mr. Shekhar Saha, Mr. Badrul Islam, Mr. Debjyoti Das, Mr. Amar

Kumar Das, Mr. Utpal Bandopadhyay, Mr. Trailukya Bora, Mr. Gopal Deka, Mr.

Pulak Hazarika and Ms. Jyoti Prasad Saikiawere required to provide full inventory of

the assets and properties within 21 days from the date of receipt of the interim order.

However, no such details have been filed till date.

21. At this stage, I note the observation made in the interim order that the balance sheet

of the Company for the Financial Year 2009–10, had reflected the ‘share application

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money’ as �12.42 lakh, which subsequently increased to �13.72 lakh during the

Financial Year 2010–11. The interim order has also observed that the Company has

not submitted the Annual Accounts and Annual Returns with the Registrar of

Companies for the Financial Years 2011–12, 2012–13 and 2013–14. I note that

during the course of personal hearing the Company and its directors were inter alia

asked to submit the latest balance sheet. However, no such details have been

submitted by it, inspite of granting sufficient opportunities.

22. In view of the discussion above, appropriate action in accordance with law needs to

be initiated against the Company and the directors/ promoters in charge of the

affairs of the Company, during the relevant period.

23. Therefore, I, in exercise of the powers conferred upon me under section 19 of the

Securities and Exchange Board of India Act, 1992 read with sections 11 and 11B

thereof hereby issue the following directions:

a. The Company,Phenix Properties Limited [PAN: AAECP2476Q], its directors

namely Mr. Ashim Das [PAN:AMRPD2405P], Mr. Nirmalya Mukherjee

[PAN: ALMPM5615N], Mr. Abu Naseer Jamir Ahmed [DIN: 1996430], Mr.

Prithiish Das [PAN: AINPD9015B], Mr. Somnath Gupta [PAN:

AGGPG9365G], Mr. Samir Saha [PAN: BJMPS7143A], Mr. Saurabh

Chakraborty [PAN: AHLPC8055B], Mr. Moloy Dey [DIN: 2235938], Mr.

Kamdev Bhattacharjee [PAN: AISPB3975F], Mr. Shekhar Saha [PAN:

AKAPS2175E], Mr. Badrul Islam [PAN: AATPI5977M], Mr. Debjyoti Das

[PAN:AKCPD2678K] and Mr. Amar Kumar Das [PAN: AJTPD9357P] jointly

and severally, shall forthwith refund the money collected by the Company through

the issuance of Redeemable Preference Shares (which have been found to be issued

in contravention of the public issue norms stipulated under the Companies Act,

1956), to the investors including the money collected from investors, till date,

pending allotment of RPS, if any, with an interest of 15% per annum compounded at

half yearly intervals, from the date when the repayments became due (in terms of

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Section 73(2) of the Companies Act, 1956) to the investors till the date of actual

payment.

b. The repayments to investors shall be effected only in cash through Bank Demand

Draft or Pay Order.

c. The Company and/ or its present managementare permitted to sell the assets of the

Company only for the sole purpose of making the refunds as directed above and

deposit the proceeds in an Escrow Account opened with a nationalised Bank.

d. The Company and its present managementshall issue public notice, in all editions of

two National Dailies (one English and one Hindi) and in one local daily with wide

circulation, detailing the modalities for refund, including details on contact persons

including names, addresses and contact details, within fifteen days of this Order

coming into effect.

e. If the Company, Phenix Properties Limited and/ orthe directors have repaid the

investors as claimed by it, the Company may include such repayment in the report to

be submitted under para 23(f), provided the Company has met with the criteria laid

down under para 23(b) and it pays interest of 15% per annum compounded at half

yearly intervals, from the date when the repayments became due (in terms of Section

73(2) of the Companies Act, 1956) to the investors till the date of actual payment.

f. After completing the repayments, as directed in this Order, the Company shall

submit proof regarding the repayments to two independent peer reviewed Chartered

Accountants who are in the panel of any public authority or public institution, who

shall verify such documents. On being satisfied that repayments have been made as

per the above directions to all the investors from whom the Company had collected

the money, the Chartered Accountants shall certify the same. The Company shall

thereafter, file such certificate, within a period of three months from the date of this

Order with SEBI. For the purpose of this Order, a peer reviewed Chartered

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Accountant shall mean a Chartered Accountant, who has been categorized so by the

Institute of Chartered Accountants of India (‘ICAI’).

g. In case of failure of the Company, Phenix Properties Limited, its directors

including Mr. Ashim Das, Mr. Nirmalya Mukherjee, Mr. Abu Naseer Jamir Ahmed,

Mr. Prithiish Das, Mr. Somnath Gupta, Mr. Samir Saha, Mr. Saurabh Chakraborty,

Mr. Moloy Dey, Mr. Kamdev Bhattacharjee, Mr. Shekhar Saha, Mr. Badrul Islam,

Mr. Debjyoti Das and Mr. Amar Kumar Das in complying with the aforesaid

directions, SEBI, on expiry of three months from the date of this Order,-

i. shall recover such amounts in accordance with section 28A of the SEBI Act

including such other provisions contained in securities laws.

ii. may initiate appropriate action against the Company, its promoters/ directors

and the persons/ officers who are in default, including adjudication

proceedings against them, in accordance with law.

iii. would make a reference to the State Government/ Local Police to register a

civil/ criminal case against the Company, its promoters, directors and its

managers/ persons in-charge of the business and its schemes, for offences of

fraud, cheating, criminal breach of trust and misappropriation of public funds;

and

iv. would also make a reference to the Ministry of Corporate Affairs, to initiate

appropriate action as deemed fit.

v. would also make a reference to the Ministry of Corporate Affairs to flag the

names of notice directors in its database so that information may be perused

by RoC or any other regulatory authority.

h. The Company namely Phenix Properties Limited is directed not to, directly or

indirectly, access the capital market by issuing prospectus, offer document or

advertisement soliciting money from the public and is further restrained and

prohibited from buying, selling or otherwise dealing in the securities market, directly

or indirectly in whatsoever manner, from the date of this Order till the expiry of four

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(4)years from the date of completion of refunds to investors, made to the satisfaction

of SEBI, as directed above.

i. The directors of the Company namely Mr. Ashim Das, Mr. Nirmalya Mukherjee,

Mr. Abu Naseer Jamir Ahmed, Mr. Prithiish Das, Mr. Somnath Gupta, Mr. Samir

Saha, Mr. Saurabh Chakraborty, Mr. Moloy Dey, Mr. Kamdev Bhattacharjee, Mr.

Shekhar Saha, Mr. Badrul Islam, Mr. Debjyoti Das and Mr. Amar Kumar Das are

restrained from accessing the securities market and are further prohibited from

buying, selling or otherwise dealing in securities, directly or indirectly, with

immediate effect. They are also restrained from associating themselves with any

listed public company and any public company which intends to raise money from

the public, with immediate effect. This restraint shall continue to be in force for a

further period of four (4)years on completion of the repayments, as directed above.

j. For the reasons stated above in this Order, the directions imposed on Mr. Utpal

Bandopadhyay [DIN: 1899027], Mr. Trailukya Bora [DIN: 1899058], Mr. Gopal

Deka [PAN: AFUPD9977N], Mr. Pulak Hazarika [DIN: 1899072] and Ms. Jyoti

Prasad Saikia [DIN: 1899043]vide the interim order dated April 24, 2015, are revoked

and the proceedings against these are disposed of.

k. The above directions shall come into force with immediate effect.

24. This Order is withoutprejudice to any action, including adjudication and prosecution

proceedings, that might be taken by SEBI in respect of the above violations

committed by the Company, its promoters, directors and other key persons.

25. Copy of this Order shall be forwarded to the recognised stock exchanges and

depositories for information and necessary action.

26. A copy of this Order shall also be forwarded to the Ministry of Corporate

Affairs/concerned Registrar of Companies, for their information and necessary

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action with respect to the directions/restraint imposed above against the Company

and the individuals.

DATE : April 27th, 2016 PRASHANT SARANPLACE : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order against Phenix Properties Limited

Documents

Transcript of Order against Phenix Properties Limited